1. CHAPTER 6 Supply Chain Management MARIA KHAN

2. Learning outcomes
Identify the main elements of supply chain management and their relationship to the value chain and value networks
Assess the potential of information systems to support supply chain management and the value chain.

3. Management issues
Which technologies should we deploy for supply chain management and how should they be prioritized?
Which elements of the supply chain should be managed within and beyond the organization and how can technology be used to facilitate this?

4. Introduction to SCM
SCM is the integration of key business processes from end user through original suppliers that provides products, services, and information that add value for customers and other stakeholders Global Supply Chain Forum (GSCF)
Supplier
Manufacturer
Distributor
Retailer
Customer
Upstream
Downstream

5. Supply Chain Management
Supply chain management (SCM) is the management of the flow of goods.
It includes the movement and storage of raw materials, work-in- process inventory, and finished goods from point of origin to point of consumption.
Interconnected or interlinked networks, channels and node businesses are involved in the provision of products and services required by end customers in a supply chain. 

6. SCM: Definition
“ Supply chain management has been defined as the "design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand and measuring performance globally. “

7. 1. Planning: Advanced planning and scheduling Optimization Distribution planning Collaborative planning, forecasting and replenishment Sourcing: Indirect or e-procurement Direct material sourcing Supplier relationship management

8. 3. Manufacturing: Product life cycle Management Enterprise asset Management Enterprise production Management Supply-chain control Product development Management

9. 4. Management: Supply-chain event Management Process management Supply-chain visibility Execution: Fulfillment Logistics collaboration Transportation Management Global trade management

10. 6. Selling: E-commerce platforms Catalog management Order management Customer-relationship Management.

11. SCM – some definitions Supply chain management (SCM):
The coordination of all supply activities of an organization from its suppliers and partners to its customers.
1. Upstream supply chain:
Transactions between an organization and its suppliers and intermediaries, equivalent to buy-side
e-commerce.

12. SCM – some definitions 2. Downstream supply chain:
Transactions between an organization and its customers and intermediaries, equivalent to sell-side e-commerce.

13. Members of the supply chain
Members of the supply chain: (a) simplified view, (b) including intermediaries

14. ECR
ECR is focused on demand management aimed at creating and satisfying customer demand by optimizing product assortment strategies, promotions, and new product introductions. It creates operational efficiencies and costs savings in the supply chain through reducing inventories and deliveries.

15. Objective and strategies
Objectives and strategies for effective consumer response (ECR)

16. Using technology to support SCM
Early implementation( ):
PC-based EDI purchasing system
Electronic trading gateway( ):
EDI-based but involved a wider range of parties
The move towards Internet commerce (1996 onwards):
Provide a lower-cost alternative to traditional EDI

17. A history of SCM at BHP Steel
Early implementation( ):
This was a PC-based EDI purchasing system.
Objectives:
reduce data errors to 0
reduce administration costs
improve management control
reduce order lead time

18. A history of SCM at BHP Steel
Benefits included:
rationalization of suppliers to 12 major partnerships (accounting for 60% of invoices).
80% of invoices placed electronically by 1990.
7000 items were eliminated from the warehouse, to be sourced directly from suppliers, on demand.
Shorter lead times in the day to day – from 10 days to 26 hours for items supplied through a standard contract and from 42 days to 10 days for direct-purchase items.
Barriers:
Mainly technological. Another significant barrier is the cost in time and money in the initial set-up. The preliminary expenses and time that arise from the implementation, customization and training can be costly.

19. Electronic trading gateway 1990-1994
Character
Also EDI-based, but involved a wider range of parties both externally (from suppliers through to customers) and internally (from marketing, sales, finance, purchasing and legal)
Aim
Provide a combined upstream and downstream supply chain solution to bring benefits to all parties

20. Continued….
Learning's
The difficulty of getting customers involved – only four were involved after 4 years, although an industry-standard method for data exchange was used. This was surprising since suppliers had been enthusiastic adopters.
From 1994, there was no further uptake of this system.

21. The move towards Internet commerce 1996 onwards
The Internet was thought to provide a lower-cost alternative to traditional EDI for smaller suppliers and customers, through using a lower-cost value-added network.
Objectives:
Extend the reach of electronic communications with supply chain partners.
Broaden the type of communications to include catalogue ordering, freight forwarding and customer ordering.
Barriers:
The main barriers to implementation at this stage have been business issues, i.e. convincing third parties of the benefits of integration and managing the integration process.

22. Continued….
Barriers:
The main barriers to implementation at this stage have been business issues, i.e. convincing third parties of the benefits of integration and managing the integration process.

23. A typical supply chain (example from The B2B Company)

24. A simple model of supply chain
Acquisition of resources (inputs)
Transformation (process)
Products and services (outputs)

25. E-Procurement
The e-procurement value chain consists of indent management, e-Tendering, e-Auctioning, vendor management, catalogue management, Purchase Order Integration, Order Status, Ship Notice, e- Invoicing, e-Payment, and contract management

26. E-Invoicing
Electronic invoicing is a form of electronic billing.  E-invoicing methods are used by trading partners, such as customers and their suppliers, to present and monitor transactional documents between one another and ensure the terms of their trading agreement are being met. These documents include invoices, purchase orders, debit notes, credit notes, payment terms and instructions and remittance advices. 

27. What is logistics?
Logistics is the management of the flow of goods between the point of origin and the point of consumption in order to meet some requirements
Used to refer specifically to the management of logistics or inbound and outbound logistics
Inbound logistics:
The management of material resources entering an organization from its suppliers and other partners
Outbound logistics:
The management of material resources supplied from an organization to its customers and intermediaries

28. Push and pull supply chain models
Push and pull approaches to supply chain management

29. The Value Chain
A model that considers how supply chain activities can add value to products and services to be delivered to the customer

30. Restructuring the internal value chain
Some weaknesses in the traditional value chain:
Most applicable to manufacturing of physical products
It is a one-way chain involved with pushing products to the customer
Does not emphasize the importance of value networks

31. Deise et al. (2000) adapted a new model
Two alternative models of the value chain: (a) traditional value chain model (b) revised value chain model

32. Towards virtual organization
An organization which uses information and communication technology to allow it to operate without clearly defined physical boundaries between different functions;
Lack of physical structure
Reliance of knowledge
Use of communications technology
Mobile work
Boundary less and inclusive
Flexible and responsive

33. Benefits of applying IS to SCM
Increased efficiency of individual processes:
Benefit: Reduced cycle time and cost per order
Reduced complexity of the supply chain
Benefit: Reduced cost of channel distribution and sale
Improved data integration between elements of the supply chain:
Benefit: Reduced cost of paper processing

34. Continued…. Reduced cost through outsourcing:
Benefits: Lower costs through price competition and reduced spend on manufacturing capacity and holding capacity. Better service quality through contractual arrangements?
Innovation:
Benefit: Better customer responsiveness.

35. Benefits of SCM Better visibility to customers and trading partners
Better business engagement processes
Less human dependency
Productivity improvement
Consistent, secure and reliable data exchange
Shorter cycle times
End to end system feeds expandability to other sites

36. Benefits to buying company
Increased convenience through 24 hours a day, 7 days a week, 365 days ordering
Increased choice of supplier leading to lower costs
Faster lead times and lower costs through reduced inventory holding
The facility to tailor products more readily
Increased information about products and transactions such as technical data sheets and order histories

37. IS-supported downstream SCM
Involves selling direct to customers
Operating a strategy of disintermediation by reducing the role of its branches

38. DELL EXAMPLE
Dell Computer is breaking the boundaries between departments to develop next-generation capabilities in supply chain management. Dell is an excellent example for breaking the boundaries. Dell Computer Corporation is the world’s leading direct computer systems company, with more than employees in 33 countries. Dell has completed a supply chain program called DSi2 to rapidly develop next-generation capabilities in supply chain management for the organization.

39. DELL
The new capabilities are focused on breaking the boundaries between departments through:
. redesigning materials requirements planning (MRP) processes and configuring i2’s Supply Chain Planner (SCP) tool
. enabling collaboration with suppliers regarding forecast and purchase information and configuring i2’s Rhythm Collaboration Planner (RCP) tool
. assimilating and summarizing global demand and supply data from each of Dell’s regions and providing the business community visibility to this much sought-after data
e-commerce and supply chains – breaking down the boundaries 437 automating factory scheduling processes

40. AMAZON EXAMPLE
Customers of Amazon interact with its website and carry out a number of functions including:
browsing readers’ reviews of books;
reading feature articles about books and authors similar to those found in magazines and newspapers;
searching for details of a book based on information such as the author's name or the title of the book;
browsing the books which are the Amazon bestsellers;
ordering books using credit cards or some other similar payment method;
tracking the progress of an order.

41. Amazon
Behind the scenes of the Amazon site are a number of conventional functions which are found in all retailing applications, these include:
stock management: keeping track of what books are in stock and ordering titles when stocks become low;
payment management: paying suppliers of books for those that have been delivered;

42. customer payment management: keeping track of payments made by customers and of payments made by credit card companies and banks which correspond to the customer payments;
delivery: the process of sending books to customers;
market analysis: the process of analyzing sales in order to determine what books to order and which to discount in the future. This analysis occurs at both the customer level and at a temporal level in that customer preferences are processed and the times and dates when they express these preferences are analyzed; for example, in order to answer questions such as what books sell well at Christmas or at Easter?

43. Top Companies with Best SCM
The 2013 top 25 are:  1    Apple 2    McDonald's 3    Amazon.com 4    Unilever 5    Intel 6    P&G 7    Cisco Systems 8    Samsung Electronics 9    Coca Cola Company 10    Colgate-Palmolive

44. Top Companies with Best SCM
11    Dell 12    Inditex 13    Wal-Mart Stores 14    Nike 15    Starbucks 16    PepsiCo 17    H&M 18    Caterpillar 19    3M 20    Lenovo Group 21    Nestlé 22    Ford Motor 23    Cummins 24    Qualcomm 25    Johnson & Johnson

45. Responsibilities of SCM Manager
Planning delivery timetables
Ensuring stores have enough stock
Making sure suppliers have enough stock to meet demand
Overseeing the ordering and packaging process
Monitoring stock levels
Tracking products through depots to make sure they arrive at their destination
Overseeing arrival of shipments

46. Responsibilities of SCM Manager
material resource planning
enterprise resource planning
audit and monitor suppliers
source components under pressure
establish new suppliers
monitor and develop existing supply chain
initiate and lead cost-saving initiatives
negotiate and manage contracts